Small Business Lending At Near 4-Year High

* Rising borrowing points to underlying economic strength


* Loan delinquencies ebbing


By Lucia Mutikani


WASHINGTON, Jan 2 (Reuters) - (Reuters) - Borrowing by small U.S. businesses hit its highest level in nearly four years in November, pointing to underlying strength in the economy.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to small businesses, surged 10.2 points to 106.4, the highest level since February 2008. The index was up 18 percent from November 2010.

"We are entering a new phase of the business cycle," said PayNet founder Bill Phelan. "Businesses are betting on the future with increased investment spending."

PayNet tracks borrowing by millions of small U.S. businesses and provides risk-management tools to the commercial lending industry.

The survey adds to other data suggesting the economy gathered momentum in the final three months of 2011, which should help it to better handle the headwinds from the debt crisis in Europe and fights over budget policy in Washington.

Fourth-quarter economic growth is seen exceeding a 3 percent annual pace, an acceleration from 1.8 percent in the third quarter.

The Thomson Reuters/PayNet small business lending index has some leading correlation with gross domestic product, preceding changes in the overall economy by two to five months.

"It (surge in borrowing) tells us there will be growth for at least the next quarter," said Phelan. "There is underlying strength in the economy that is not being reported elsewhere."

While Europe's fiscal troubles appear not to have affected the flow of credit to small businesses, they pose a big threat to the economy's growth prospects in 2012. Added to that is the uncertainty over fiscal policy in the United States.

The survey also found that small businesses are getting better at managing their debt, with loan delinquencies continuing to drop.

Accounts in moderate delinquency, or those behind by 30 days or more, dropped five basis points to 1.50 percent in November. Those behind 90 days or more in payments, or in severe delinquency, slipped 1 basis point to 0.39 percent.

Accounts 180 days or more, or in default and unlikely ever to be paid, fell six basis points to 0.58 percent.

"We are now in this new phase of growth and low risk. The key question is how long is this phase going to last?" said Phelan.

(Reporting By Lucia Mutikani; Editing by Neil Stempleman)

Comments

[podhajska]

12:19 PM on 02/10/2012

Well done to your politicians and bankers because for or us in Europe it is very tough. Small businesses are struggling to get hands on liquidity.
http://www.villaemily.sk

[devanmarie]

02:07 PM on 01/12/2012

Even though interest rates are so low, I still see business owners worried about the future and afraid to borrow money to launch new projects. I'm glad to see it's picking up though.

I attended the Vistage All-City event in Chicago the other month, and Brian Billeau of IRT Economics was the keynote speaker. In his presentation he told all the business owner attendees that "If you're sleeping through the night, you're not borrowing enough." I thought that was an interesting way to put it.

If you enjoyed this article, I think you'll find this one about borrowing and economic predictions going into 2014 interesting, too => http://www.enmast.com/2011/12/06/sleeping-night-borrowing/

[SBloanfinder]

11:55 AM on 01/09/2012

It’s great to see small business lending up, especially during a tough economy. Different lending options are available that increase the chances of loan approvals, and it isn’t always clear which ones match your specific business needs. Using available resources and thoughtful planning for the new year is essential for small business owners to smoothly kick off 2012.

Jana Hocker, group product manager at Intuit
Website: http://www.intuitloanfinder.com/
Facebook: http://www.facebook.com/SBloanfinder
Twitter: @sbloanfinder

[fmartin09]

03:15 PM on 01/04/2012

The new trend are online lenders as some of them offer really attractive terms and don're require you to establish a depository relationship with them. There are some reputable portals like CLD Capital's webportal www.CommercialLoanDirect.com

[granny104]

08:58 AM on 01/04/2012

Hopeful sign that the sputtering engine of our economy is finally trying to start.

[dtallwalk]

07:11 PM on 01/03/2012

Don't use the bank money they have bees calling in there loan vor the last few years no reason other then the banks need cash os all you worked for is now gone do it the old way pay as you go then if it fails you are not out much start small and the grow not the banks was start big and make lot of payment for so long you do not have time left to save for retirement worked for me

[castlemike]

05:06 PM on 01/03/2012

For a contrary point:

http://www.newsobserver.com/2012/01/02/1749212/bank-of-america-severing-some.html

LOS ANGELES -- Bank of America Corp., under pressure to raise capital and cut risks, is severing lines of credit to some small-business owners who have used them to stay afloat.

The Charlotte, N.C., bank is demanding that these customers pay off their credit line balances all at once instead of making monthly payments. If they can't pay in full, they are being offered new repayment plans for as long as five years, but with far higher interest rates than their original credit lines had.

Business owners complain that BofA's credit squeeze is abrupt and could strain their small companies and even put them out of business. The credit cutoff is coming at a time when the California economy can't seem to catch a break, and bucks what the financial industry says is a new trend of easing standards on business loans.

[seepositives]

02:45 PM on 01/03/2012

just remember how many closed so that a few new businesses could open.

[paid trawler]

08:16 AM on 01/03/2012

in spite of teapublicants' best efforts at obstructing president O 24/7, things are picking up. i see it around me daily.

obama 2012

[doublez]

08:05 AM on 01/03/2012

Borrowing is the reason we created money in the first place. Borrowing money and adding wealth is all business is about. It is the essence of risk-taking and enterpreneurialism. When companies borrow and banks lend monetary stock is created in a healthy way.

[mrcontinental]

07:21 AM on 01/03/2012

Borrowing money is always risky, the debt must still be serviced in good times and bad.

[Peter Combs]

10:23 PM on 01/02/2012

Small businesses are growing, they are finding their way and they are doing it with NO help from the Government...Governments don;t fix economy's, entrepreneurs do it all...

[justanoldhippie]

02:15 AM on 01/03/2012

Uh, I do work for real small businesses, and many of them were helped during this economic crisis via government legislation that provided tax incentives and support.

Take a look:
"Enacted 17 Tax Cuts: To date, the Obama Administration has passed 17 tax cuts for small businesses, including the elimination of taxes on capital gains on key investments in small businesses and 100 percent depreciation to support new investments in equipment – both in effect through this year, and both of which will be extended through the American Jobs Act. "

Here's another link: http://www.whitehouse.gov/blog/2010/09/27/president-obama-signs-small-business-jobs-act-learn-whats-it

You are misleading people with your claim that small businesses are recovering without government intervention... while it may be true that some didn't need any help, but unless they have a dum+b accountant, it would have been difficult to avoid benefiting from them.

One of my clients is both a retailer and manufacturer. We often talk about how this administration's targeting of small businesses with focused tax incentives helped him keep employees that he would have let go, helped him close down some locations (and write off those losses immediately), consolidate, and then, begin expansion once consumer demand returned.

I think it is great if you were successful without any help... but there is nothing wrong with other small business owners taking advantage of these positive tax policies.

[doublez]

08:07 AM on 01/03/2012

gvt assures the necessary conditions. Fair loans, stimulating interest rates, monetary stock. Well regulated financial markets work. This is the real turning point in this administration: changing the underlying conditions

[Lisa Rinderknecht Stein]

10:14 PM on 01/02/2012

I just tried Match Financing to find myself a business loan for my small business. Great service - double opt in so only the lenders that you are interested in will contact you. Oh, and its free for borrowers!

[aynrandfan2012]

08:51 PM on 01/02/2012

Still a bad time.........just out of curiosity......I drew up a business model for a small fast healthy food restaurant........with the current tax code,and Hitlercare in 2014........I need 1 million in sales to bag $100,000 a year......and that is working 6 days and 70 hours a week..........

[pewty]

09:30 PM on 01/02/2012

ummm yes ... I had a small business ...500k investment.... i had to work a lot of hours to make it successful.....sorry if you think your not going to work a lot of hours and still make money, your doomed to fail with that attitude.

[nopilikia]

01:40 AM on 01/03/2012

Indeed.....need's to become a Wall Street bankster or D.C. politician.

[justanoldhippie]

02:36 AM on 01/03/2012

"Hitlercare" will eventually mean that employers will NOT bear the responsibility of health insurance delivery.

THAT was the point. So that American workers didn't have the employer middle man, uh, in the middle.

Once everyone has a minimum of health insurance coverage, I won't be paying premiums that are the equivalent of buying a moderately priced use car, EACH FLIPPIN YEAR ($14,400. annually with 3k deductible)... because they are inflated to cover OTHER AMERICANS WHO REFUSE TO CARRY INSURANCE AND SHOW UP AT ERs FOR THEIR HEALTH CARE!!!

Employers should never have been allowed to remain in between health insurers and the employees, who in the private sector pay 50-100% of this cost, but do not get the benefit of the free market... since they have little choice (depending on the employer) and NO ability to negotiate PRICE because of the employer middle man.

My state embraced Health Insurance Reform, has created a health insurance exchange that has health insurance companies offering products (fighting for consumer dollars) that now cost LESS than employer based group coverage... and people in my state are buying these products, BEFORE they are mandated to (because they are affordable). Duh.

Don't blame health insurance reform for your scaring you off of your business idea. Did you ever consider that fast food start-ups may not be the high profit item you thought they were?

Maybe it is your business model that is the problem?

[doublez]

08:08 AM on 01/03/2012

Hitlercare. How absurd can we get ?

[barbra1971]

08:24 PM on 01/02/2012

continue:
I would agree with 1% added to sales tax and go to that seed bank where we will see everyday how much money there is and how much money went to whom and how they pay back. In today's world of internet the information opportunity is not properly used at all. There are incredible options available for our (and our communities) well being.